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RICHARD QUEST, HOST: A message of shock and awe to the markets and share prices climbed back from the debts. The Euro zones trillion dollar weapon. Tonight, the French Minister of Finance, Christine Lagarde, joins me live to talk about the way ahead and Brown in doubt, Britain's prime minister promises to step aside.

I'm Richard Quest. It will be a busy hour ahead because I mean business.

Good evening. Jubilation is written all over the European stock market tonight and shares sprang back to life in this session after a week of brutal losses. The euro has also recovered over the past 24 hours breaking a long losing streak, and it's all for one reason.

Of Sunday night, traders talk comfort for moves to set up a life support machine for the Euro zone. On the stock market, bank shares were gaining the most. The numbers frankly were the most remarkable, I think, I've seen in some 20 years of covering the financial world.

Just look on what we have. Join me in the live feed, the London FTSE up 5 percent, Xetra DAX, but the Parisian markets, which have been so beaten and battered in recent weeks was up 9.5 percent, and the Spain's IBEX, the best. That actually is a record of the most top market has ever moved. It was up some 14.5 percent.

Barclay's gained 15 percent. Lloyd's was up nearly 14 percent in London. The only real loser for non-technical reasons was BP and of course, we know the reasons for that with the gulf oil spill.

In Paris, now how about this? In Paris, BNP Paribas rose 21 percent, (Axo) was up 22 percent, (Socgen) up 23 percent. In Spain, Suntan there was 23 percent. It was the most remarkable recovery in fairly mature, very mature stocks that I can remember.

The euro having hit a low point of 1.25 a few days ago, 1.26, it did rally back up again. Now, we did see gains up to 130 over the course of the session, but I have to say, as the day wore on, that sort of push back down again. It did briefly just goes to say 1/30, but that's where we stand tonight, but it's still the most remarkable performance as a result of this trillion dollar package.

And this I think really sets the tone, 570 basis points came off the Greek tenure bond, which narrowed the gap. Look, it's still twice as much almost, it's still (inaudible) over the German bond, but that, when I left you on Friday was trading at more than 10 percent.

So to come down that much, well, that's an achievement indeed as a result of what they've been doing. The package that created all its bond (inaudible) in the market, and that helped things move forward so much. It was a package of support that contains the threat of contagion. The message was simple. You can't do it alone.

It's a trillion dollars, and Jim Boulden explains where the money is going.

(BEGIN VIDEOTAPE)

JIM BOULDEN, FBN CORRESPONDENT (voice-over): Nearly a trillion dollars. That's the headline grabbing number in the so-called knock out pledge by the European Union and the International Monetary Fund. The deal was struck in the early hours of Monday. So how does this all ring up?

Loans of up to around $570 billion will be guaranteed by the 16 Euro zone countries. Credit that could be tapped if and when another Greece style budget crisis arises. It's called a special purpose vehicle. A separate entity, which will take individual countries out of the business of loaning money to each other.

The vehicle, which will last for three years, was created to address German concerns about the funds being controlled by the European Commission in Brussels. There's also a roughly $80 billion emergency fund to come from the normal EU budget paid into by all 26 EU countries. That would be available for the commission to quickly tap in an economic emergency.

Finally, a massive $300 billion or so from the International Monetary Funds. The IMF taps money from the United States, Japan, and of course, Europe. So countries around the world will be contributing to stabilize the Euro zone if need be.

On top of all of these, the European Central Bank finally followed the Federal Reserve and the Bank of England by committing to buy government and private jets where markets are "dysfunctional." That would be used for example, when a borrower such as the Greek government finds as the market demands interest rates on its debt that it can't afford. The ECB facility will use capital made available by Euro zone countries.

Jim Boulden, CNN, London.

(END VIDEOTAPE)

QUEST: Jim is with me now. By any stretch of the imagination, the speed and scale of this, so what happens now?

BOULDEN: Well, first of all, we have to have everybody finally sign off on this and there is some skepticism in the market, I did get some smoking e- mails from analyst today who say, wait a minute, wait a minute, where is this money? How will they're going to part it out? How, you know, what mechanism? What special vehicle? They want to see a lot more details, and they think some people think by Friday, this - we might not see the market so happy.

QUEST: Is there a real risk? And we'll talk to the French finance minister just a moment, but from your soundings in the market, is there a real risk at this immediate optimism will dissipate and actually they may find they're back to square one.

BOULDEN: I don't know they'll go back to square one because we have a mechanism now. We have pledges of money and you can see that the markets love it, and so many other markets too. We saw so many interactions oil -

QUEST: Even the U.S. bonds -

BOULDEN: -- in oil, in so many different ways. The gain changed today, but we got to see whether it's temporary.

QUEST: All right, but many thanks, Jim Boulden.

Now, this well padded safety net is the result of a long weekend of talks in Brussels by Euro zone finance ministers and I'm joined now by the French Finance Minister, Christine Lagarde who is one of the architects of the plan.

Minister, many thanks for talking to me this evening. Lovely to have you as always on the program. Let us just begin, the size and scale of this is really quite awesome and has it restored credibility do you think to the Euro process?

CHRISTINE LAGARDE, FRENCH FINANCE MINISTER: Richard, I do think that it has restored credibility and that was the issue. Some analysts and observers, and operators doubted that there was a euro determination to save the euro, and there was a lot of skepticism as to whether Germany would be on board, whether all 16 members of the Euro zone would actually commit and would put money where their mouth is.

And we clearly did that. It was tedious. It was hard work because it's not an easy way in terms of technicalities, legalities, and all the rest of it, and more importantly we want to be together with the same instrument. That's the result of the guarantee by the 16 Euro members.

QUEST: Did - of course, the big question and only time will tell is whether it is enough, but you've said that you are prepared to defend the Euro come what may so if it's not enough, you'll all be back again.

LAGARDE: Well, look at the numbers, you know, immediate facility available of $80 billion. All 16 member states in agreement to provide guarantees up to, I forgot the amount in dollars, but it's - you know, we have been calculating in euros over the last 24 hours nonstop including during the night.

QUEST: The whole lot make a trillion dollars give or take change between friends?

LAGARDE: Yes, well, that's correct. And the amount is significant, no question about it. I think it is well structured. We are all going to go to parliaments in the next two days to make sure that we secure the guarantees and there is strong support. I know my German colleague will soon go. Other than myself make a presentation of the Cabinet meeting on Wednesday and we've kicked the ball and it's rolling and it's going to keep rolling until it is properly built, accessible and available.

QUEST: The big problem, of course, is not now the money or the stability mechanism. The big problem is ensuring that countries maintain fiscal discipline and some member countries come back to consolidation. Now, Minister, you wouldn't be doing this in the first place if the rules had been followed. So, I'm just wondering how resolute are you to ensure that the countries follow the rules?

LAGARDE: We all absolute and determined to do so. Part of the package that we negotiated last night was this huge funding mechanism that we put in place. The second part was fiscal consolidation by all members of the Euro zone particularly the most fragile ones and clearly some prime ministers have already announced yesterday additional measures to cut their deficit. And the third part, the third chapter of it all is strengthening and accelerating of the financial regulations that have to be put in place.

QUEST: Why should the markets' investors, the rest of us, believe the Euro zone countries who have a history of not living up to the promises of keeping the regulations, the deficit requirements, all the things that are supposed to be the stability of the euro.

LAGARDE: Why would it be true this time? Well, because we were close to a very, very significant risk of collapse and extremely difficult situation. The volatility that we've observed in the last week has left a lot of additional white hair for many people, and there is clear determination to be together. The collective action that we took last night is a clear indication of that and if we want to stay together and to continue developing that Euro zone, we just have to be closer, be a fighter, be more disciplined and that's the principle that we want to respect.

QUEST: And later on this program, (Mario Monte) tells us that also countries within the Euro zone need to be less a light to each other when they see things going off the rail. I do wonder finally, Minister, and does it inevitably because it is a new (idea) of the Euro, you are feeling your way as nations putting it together. Is it inevitable that it is only out of crisis that there will be significant progress?

LAGARDE: That's the way Europe has been built over time. If you look over the last 60 years, that's the history and the life of the European community. That's how it has evolved. That's how it was built pass this horrible wars that have destroyed Europe. It's from crisis to crisis that Europe has been forged, has been reinforced and we have just gone through one of those. And we're determined to improve, strengthen, bring about more discipline and certainly have those alert systems that need to function a little better when something goes wrong.

QUEST: Minister, as always, a privilege having you on the program. Many thanks for joining us in Paris tonight. Thank you very much indeed.

LAGARDE: A pleasure.

QUEST: Many thanks. Christine Lagarde joining me there from Paris. We continue the most comprehensive coverage of this crisis. A third of the value of the support package for the Euro zone is in the form of pledges from the International Monetary Fund.

I spoke to John Lipsky, the number two at the IMF who joined me on the line from Washington. I asked John if he thinks any of the bailout money will actually be needed.

JOHN LIPSKY, FIRST DEPUTY MANAGING DIRECTOR, IMF: We're not bankers, Richard. We're not looking to make loans. We're there to be helpful to our members if they need support and qualify, and to help design adjustment programs when needed.

Right now, I want to be clear. There are no program negotiations or discussions currently underway with either Portugal or Spain. We recently concluded, in fact, just yesterday formally approved the program with Greece. We're here to help if asked the funds and the expertise is available if needed.

QUEST: How - one more looks at the situation, and the inability of the Europeans to get their act together at a sooner stage than this. And even - even being diplomatic, you have to agree that the European policy makers haven't done a very good job of it.

LIPSKY: You put the question in such a neutral way, Richard. The important point here is that the European Union, the Euro zone and some of their European Union colleagues have taken a very significant step forward in creating a stronger architecture for the currency union within Europe. One of the ambiguities of the treaty that has been widely remarked over the past few years was first the degree of fiscal coordination within the Euro zone and secondly -

QUEST: Right.

LIPSKY: -- the potential availability of financial support within the zone. The step yesterday was a big one in clarifying that question and providing more solid architecture going forward. And with regard to the partnership with the IMF, what has been controversial is now clarified.

The kind of partnership that we evolved and is working successfully Greece is the paradigm going forward. That we will partner in Euro zone countries with our European colleagues.

QUEST: Finally, John, what I know - my view I want to know tonight, is it your opinion that enough has now being done to take the pressure off the markets, to allow the stability to return and for proper consumer consolidation of macro-economic policies.

LIPSKY: Well, Richard, what has happened? The European - the Euro zone countries have created a mechanism with a clear role of helping to promote fiscal adjustment and economic balance within the Euro zone. It has been provided -- that mechanism has been provided with very large amount of funds, large enough to confront any of the problems immediately facing it. That the role of the IMF and the partnership of the IMF has been solidified.

At the end of the day, of course, the individual countries will have to take and implement the measures necessary to produce the fiscal adjustment and promote economic balance. So at the end of the day, the countries will have to act, but the supporting mechanisms including financial support are now clearly in place.

QUEST: John Lipsky of the IMF talking to me early. We have much more on the Euros woes and problems and the jubilation in the markets as the program lives on.

Also, in just a moment, goodbye, Gordon Brown. The British prime minister and the leader of the Labour Party says, he's stepping down soon even though there's no still clear winner from last week's election. We'll be live in Downing Street in just a moment.

(COMMERCIAL BREAK)

QUEST: The news headlines now. I almost hesitate to say the words, British general election to Becky Anderson, but there is a lot that we need to get -- to get to you tonight on that.

BECKY ANDERSON: I thought he fat lady had sung already, but she has (inaudible) goes on British Prime Minister Golden Brown is making a dramatic bid to keep his Labour party in power. He says he'll resign by September essentially clearing away for Labour to be in coalition talks with the Liberal Democrats.

Now, the Lib-Dem leader Nick Clegg has suggested any deal with Labour may require Mr. Brown's departure. Well, the Liberal Democrats also talking to Conservatives who won the most seats in last week's election, but they do still lack a majority.

Germany Chancellor Angela Merkel calls it a bitter defeat. Her Center Rights Coalition lost a regional election. Widely considered a protest vote says that her handling of the Greek financial crisis. A defeat in Germany's most popular state and her coalition's majority in the upper House of Parliament. Chancellor Merkel says she is now scrapping plans of tanks cuts, (inaudible) on Germany zone stretched finances.

Monday is being one of the deadliest days in Iraq this year. At least 72 people were killed in bombings across the country. The deadliest result took place in the city of (Hilla). A double car bombing killed 23 people as medics and security forces arrived, the suicide bomber killed an additional 13 people.

In the Philippines, the voting is over and the count is underway. Unofficial results show Senator Benigno Aquino III, son of former President Corazon Aquino leading the race for president. Filipinos also voted for the vice-president in about 17,000 local and provisional posts.

And those as it stand at present at least, Richard, all the headlines.

QUEST: We thank you, Becky Anderson, for that. We're going to continue to look at the British general election. Gordon Brown, the British Prime Minister has announced he'll be stepping down as prime minister.

(BEGIN VIDEO CLIP) GORDON BROWN, BRITISH PRIME MINISTER: The reason that we have a hung parliament is that no single party and no single leader was able to win the full support of the country. As a leader of my party, I must accept that is the judgment on me. I, therefore, intend to ask the Labour parties to set in train the processes needed for its own leadership election. I would hope that it would be completed in time for the new leader to be in post by the time of the Labour party conference. I will play no part on that contest. I will bank no individual candidate.

(END VIDEO CLIP)

QUEST: The parties are continuing to talk about who gets to form the next government. This I promise you is complicated stuff, but it is also the most rebutting that I can remember in 20 to 25 years of covering British news and politics. CNN's Paula Newton is at Westminster tonight.

Paula, so look, we need to go through this. Gordon Brown steps down as the party leader, but he's only really doing that assuming and hoping, of course, that the Liberal Democrats and Labour come together, and he takes them into the next government.

PAULA NEWTON, CNN INTERNATIONAL SECURITY CORRESPONDENT: Well, Richard, he has already the dangled the best thing he had and that was a referendum on electoral reform in from of the Lib-Dems. What he has now done is remove the last hurdle to at least talking about that kind of a coalition and I can tell you many people from the Liberal Democratic party are very happy about this. They feel more comfortable with Labour. They've given in a go with the Conservatives. They will continue to talk to them. At the end of the day, they come to the table and they feel that they can get a better deal from Labour. They knew that Gordon Brown would have to - in their words, sacrifice themselves in order to make this happen. He has done that. He's out of the way and we still wait. These people, the Liberal Democrats tell us they will continue to negotiate simultaneously with both the Conservatives and the Labour party - Richard.

QUEST: Paula, all right, in all of these, you got Conservatives who are still talking. Labour and Liberals are now talking, and you've then got Gordon Brown on his way out at some point post - some opposed on (inaudible). And - but Britain still doesn't have a government. Are people in this country getting annoyed by that? What's your feeling on that?

NEWTON: I didn't travel the country all that much, but in the last couple of weeks, I had been from one end to the other. Richard, there was a keen appetite for a hung parliament. I think as much as the markets don't want to hear this, Richard, they wanted to try things a little bit differently. They wanted to shake up the political system. That's why we essentially had, this might be a bit harsh, three losers out of this election. They want to try and give this a go. QUEST: But, Paula, tell me then, the parliament is due to meet 27th of May, when realistically, I know, and I'm not asking you to put money or your scarf on it, when you do you think there'll be a government in Britain or a new one?

NEWTON: I guess I won't put my scarf on it, but most people here want this dual track to continue until, get this, Richard, Friday. That gives you a lot to talk about on these markets for the next few days. Friday, Richard, they certainly don't want to go into another weekend like we just had. They know that will really spoil a lot of things for them. And the key thing here is, Richard, is that the longer it goes on, the more the markets and the more voters will expect from them when it`s over.

QUEST: Paula Newton at Westminster who would probably be there until Friday and beyond. Many thanks for that. Now it looks like a bus, it drives like a bus, but it isn't a bus. Whatever else it is, one to the residents and one city hope that represents the speedy, economical future of public transport. We are looking at the future cities next.

(COMMERCIAL BREAK)

QUEST: Welcome back to Las Vegas now as part of future cities series. You know the old phrase what happens when Vegas stays in Vegas. Well, what's happening there at the moment, (inaudible) that will be exported elsewhere. As an outsider, it's easy to be dazzled by the city's reputation, gambling, glitch, extravagance. We also be surprised by (inaudible) green and for that once again, we're not talking dollars. We are not. We're talking instead green, real green.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: -- congestion on that north bound 15 is make your way up from traffic -

UNIDENTIFIED MALE: So sluggish through the area and it still a slow merge to go from the 95 south.

QUEST: 7 a.m. and rush hour in Las Vegas.

UNIDENTIFIED MALE: Traffic operations center.

QUEST: But the Regional Transportation Commission, engineers are monitoring more than a hundred traffic cameras. Making sure the morning commute keeps moving. Not long ago, this was America's fastest growing city, and the population boom was best seen on its roadways. For 25 years, Las Vegas saw an increase of 112 cars per day every single day.

UNIDENTIFIED MALE: The car culture is spread out. In and out of places, malls and so forth.

RON SMITH, UNIVERSITY OF NEVADA, LAS VEGAS: Las Vegas, if you look at historically was highly criticized for being unplanned, and you know, it's correct, we were unplanned. There was no real thinking.

JACOB SNOW, REGIONAL TRANSPORTATION COMMISSION: And we just kind of been adding and building and adding on that, we've - it's been a real challenge to keep up with all those automobiles. We added a lot of new freeways and we added a lot of new roadways.

QUEST: As head to Transportation Commission, Jacob Snow, is charged with the not so easy task of improving public transit in Las Vegas.

SNOW: We can't compete with every trip the automobile can make, and we don't strategically, we don't want to make that type of a mistake. The idea of transit here is new to a lot of folks and so we've had to make incremental progress to what we've offered the community.

QUEST: Incremental until now. Today, Snow is a passenger in what he sees as the future of public transit in his city. Launched at the end of March, a fleet of diesel, electric, hybrid vehicles, complete with new station and dedicated lanes, which (inaudible). Snow says, you can call it a street car, you can even call it light rail without the rail, but whatever you do, don't call it a bus.

SNOW: Well, we've built this whole system as if it were a train emulation system. Stations, platforms, ticket vending machines, it's not your grandfather's bus stop. The dedicated lanes are really the dedicated running way. It's like the track without the expense of the track, without the electrification and everything else.

And all the growth that we've seen, it's difficult to say, well, we're going to put all these millions of dollars, tens of millions of dollars into one corridor and we're not going to expect that corridor to change. We've seen a lot of change here. A lot of dynamic and very rapid growth, and the fact that this is on rubber tires, what it lacks in sex appeal, we make up on flexibility. And we think it's a pretty - we think it's a very attractive vehicle anyway.

QUEST: This is Vegas after all, and with more than four years of planning, Snow says his team wasn't about to give one of the entertainment capitals of the world, just another transit line.

SNOW: Well, this is Las Vegas, so what we provide has to have - it has to look nice. It has to have a little bit of glitch.

QUEST: Well, the neon signs may draw people to the stations. It will take more to get them on the vehicles.

SNOW: If we can make it faster, then people can get a place - get to a place with their cars then we can be really successful if we could save people time. Traditionally, the focus in American transit has been on saving people money and we're going after that market. And that is only going to have limited success. We need to save people time.

QUEST: The line is expected to serve millions of tourists, but for Jacob Snow, the success of the project will be in the opinions of the people, those who actually live here.

SNOW: Forty percent of the cars that are in the strip in the afternoon peak hour are people that are getting off work, going home. There are a lot of us who live here and we want to be able to feel good about mobility. We want to be able to feel good about our community. We commute to work. We don't live near casino.

For most of us, most of our lives, we don't go into casinos. This is -- this is our home and we have regular lives. And we want to feel like we're regular people. And projects like this, I think, will help us accomplish that.

QUEST: A potential sign that this notoriously transient city may finally be ready to embrace a new mode of transportation.

(END VIDEO TAPE)

QUEST: Future Cities, which, this month, is focusing on Las Vegas.

When I come back in a moment, for anyone with money at stake on the markets, this session has been an extraordinary day We'll have live action from the New York Stock Exchange, where, as you can see, we're up nearly 3.5 percent.

A senior and top economist helps tell us what it all means and whether the Eurozone is really up for business.

(COMMERCIAL BREAK)

QUEST: Hello.

I'm Richard Quest, QUEST MEANS BUSINESS.

This is CNN.

And what a remarkable day it has been. Even on Wall Street, investors are keeping the global rally going.

Felicia Taylor is in New York.

The market is up 350 points -- Felicia, you do not see days like this very often.

FELICIA TAYLOR, CNN CORRESPONDENT: Nope, indeed you do not, Richard.

The American bulls taking their cue from Europe, following on word of that bailout package from Greece.

The euphoria has died down, though, a little bit. We were up more than like 450 points at one point. You can see evidence of that actually in the euro. If all was really in the clear, the euro probably would have gained a little bit of strength today.

But the German parliament still has to approve this, as you well know. It's still unknown exactly how the bailout is going to be implemented.

Some traders here are calling this kind of a -- a relief rally. Fundamentally, American companies are 4 to 6 percent better -- that's the average stock gain on the Dow right now -- than they were last Friday.

Other traders are calling this simply a sucker's rally. If you don't know any better, you get sucked into buying. Typically, a market has two major declines before a significant move higher. So you can't take this first bump lower as a sign that the downside is really over.

The big unknown in the market remains -- just what actually happened last Thursday to cause that rapid 980 point freefall.

Part of the problem -- the exchanges, believe it or not, do not have uniform rules for downside protection. That's why we have a problem.

Simply because the New York Stock Exchange can halt or slow down trading by returning to that old-fashioned way, the human way of executing a trade, doesn't mean the other exchanges will follow suit.

QUEST: OK.

TAYLOR: OK. New York is just one thing. Senator Chuck Schumer, he's calling for some sort of a system wide circuit breaker that would slow down those massive drops -- Richard.

QUEST: In the last couple of hours, I'm just looking at it at the moment. In the last hour or two, the SEC has now started to say that they're going to be changing the rules and they are going to be looking into this. You're -- you're across this more than I am at the moment.

TAYLOR: Yes, exactly. What's happening right now in Washington is the Securities and Exchange Commission, the SEC, the CFTC, the Commodity Futures Trading Commission, is meeting with the heads of the big exchanges -- the New York Stock Exchange, the NASDAQ, etc. To talk about exactly what happened last Thursday and to implement new rules and regulations that would put some kind of a uniform format in place to prevent that from happening again.

There will be a hearing tomorrow. Today is more of a closed door meeting. So tomorrow, we should get some more information as to whether or not they've come up with anything.

QUEST: Right.

TAYLOR: But the truth is, these things take time. It's probably not going to be anything we hear about for weeks, if not some months to come -- Richard.

QUEST: Well, go and get your glass and put it to the wall so you can hear what's going on in those meetings.

Felicia, you and I will talk more about that tomorrow.

I'm going to want to focus back on the issues relating to the Eurozone and the vast wall of money.

Ken Rogoff is a professor of economics at Harvard University, also a former chief economist at the IMF.

Ken is with me now.

A very simple question to start off a typical subject -- have the Europeans done enough and is the crisis over?

KEN ROGOFF, PROFESSOR OF ECONOMICS, HARVARD: The crisis is not over, but they've kicked the can down the road. They've definitely bought a year or two, particularly by giving the European Central Bank cover to buy all kinds of government debt and bonds. That's really what happened.

QUEST: If they've kicked it down the road, is there risk that the countries don't put their fiscal houses in order or what -- is -- or where -- where would you see the actual risk?

Because if the countries do what they're supposed to do, then this wall of money is the caution that's required?

ROGOFF: Well, you said it well. I mean I watched this kind of thing, you know, a long time over the years and Scottie did. And so often, the big money comes in, the country is given time. But it's tough. They have to consolidate so much, not just in Greece, but in Portugal, in Spain and in other countries. They're not going to find it easy. And these are just loans. They're not being given money. They have to pay it back. So there's a lot of belt tightening.

And, of course, the German parliament may not be so happy. The German voter is already not so happy. And the ECB cannot be happy about being pressured into all of this.

So it's a very, very risky maneuver. They've pushed the can down the road, hoping a recovery would put them in a better position later.

QUEST: Is the ECB tonight no longer an innocent virgin when it comes to -- to being politically pressured?

After all, let's face it, the quantitative easing -- even sterilized quantitative easing that they're proposing to do was the one thing that they haven't said they would do. And it wasn't unanimous.

ROGOFF: Well, this is a very tough decision, the same reason there was with the Fed. Not only is it something they didn't want to do, it's going to make it much harder to preserve their independence, much harder to preserve their secrecy, much harder to preserve their finances, really, going down the road. They're very nervous about it.

But, frankly, what were they going to do?

If Greece and Portugal defaulted -- and I would have thought they would have moved after that -- then they eventually would have had to turn to this...

QUEST: Right.

ROGOFF: They eventually would have had to pull out all the stops.

QUEST: Do you have any sympathy to the view that actually -- actually, default is inevitable and let's -- let's use a less pejorative word, restructuring is inevitable for countries like Greece and the sooner they get on with it the better?

ROGOFF: Yes, I -- I actually think for Greece to do it immediately would be far better than to suffer a few years of deep recession, end up with a debt relative to an income that's higher -- much higher than today - - that's what the IMF projects -- and then they default and suffer.

No, but Greece is really being pushed into doing this by its European partners, because they're afraid of contagion across Europe.

QUEST: All in all, Ken, you're not -- I can tell by the look on your face, you're not a -- compared to the jubilation that we've seen around the world in the financial markets, you haven't got the bunting and the balloons out.

ROGOFF: Well, no. But I mean at least they didn't do something totally stupid, which was definitely possible. They came across, I would have let Greece and Portugal restructure first then do this. But it shows some unity. It's a good move. It doesn't solve all the problems, by any means.

QUEST: Ken, lovely to have you with us making sense of this.

Many thanks, indeed.

Ken Rogoff, who joins us there from Harvard.

Now, on the face of it, this rescue package is an example -- a great example of the European community spirit. As ken was just saying, in Germany, a lot of people are saying how they really feeling about helping out the neighbors. And they're saying it at the ballot box. We'll be in Germany after the break.

(COMMERCIAL BREAK)

QUEST: Welcome back to QUEST MEANS BUSINESS.

The crisis began in Greece when the country realized it could no longer refinance its debts. Greece received the first tranches of money -- or at least will do next week, as part of its $110 billion euro's worth of cash that it will be getting.

So what did the Greek prime minister, George Papandreou, make of the announcement that now a trillion dollars is being up for grabs to protect the euro?

(BEGIN VIDEO CLIP)

GEORGE PAPANDREOU, GREEK PRIME MINISTER: Well, in many ways, Greece became a test case. We have taken very, very difficult and strong measures for making our economy -- turning around our economy to make it sustainable, with fiscal reform, many important changes. However, the volatility in the markets did not allow us to -- give us the time. And it responded -- continued to respond very negatively.

That is why we needed to have the really -- the time, the -- the oxygen -- oxygen, if you like, in order to implement these reforms. And this is where Europe stepped in.

(END VIDEO CLIP)

QUEST: Whatever else happens, fundamental reform of the way the European Union, and particularly the Eurozone, goes about its business is inevitable. For instance, in a report published today that sets out ways that it can improve Europe's economic performance. But author of the report is the former European Commissioner, Mario Monti.

Now, he's a former E.U. commissioner and he was very quick and eager to talk about what lessons the Eurozone could learn from the Greek and the current crisis.

(BEGIN VIDEO CLIP)

MARIO MONTI, PRESIDENT, BOCCONI UNIVERSITY: The Greek crisis shows, well, two things, in my view. First of all, that we cannot really have a sustainable monetary union and a single currency if we do not have also an underlying, very, very solid economic union with a single market, with the -- the wind of competition and openness. And the Greek economy is, in too many respects, slow growing, insufficiently productive and competitive, also because it has not yet fully embraced, in all its aspects, a single market.

QUEST: But if we take, for example, the way in which Germany handled the negotiations over this crisis and we look at -- for example, at the German role in all of this, you realize that your dream of an economic union, which is partially to a political union, is -- is vastly out of -- out of the realms.

MONTI: Not at all. Germany has been, of course, over -- over the decades of European integration, the driving force of this dream, in part realized, the common market and, to some extent, the economic union. Certainly, Germany has also been able, through the euro -- the euro now has some weaknesses, but through the euro, Germany has been able to sort of export its culture of stability and the budgetary discipline.

QUEST: Surely there's one big problem with the whole system, and that is the ability for countries to either fudge or get round the rules.

If countries had not borrowed too much, if they had stuck to the stability pact and the mastery criteria, then 90 percent of this problem would never have arised.

MONTI: You are entirely right. And in my view, Europe -- in Europe, we should become a bit less polite to each other. If a country presents fingers on its public deficit, we need to go in that and check on whether they are real. And equally, if a country persuades its peers that it is going to reduce its deficit, all the others must have a close look. Mutual politeness can be detrimental.

QUEST: And, by that same token, would you be prepared today to say that Germany should have moved quicker in agreeing a stabilization funds?

Did we have to get to the fiasco of ministers meeting and making it up as they're going along on a Sunday night?

MONTI: It would have been much preferable if Germany could act quicker. We know, however, that the German constitutional court last year issued a ruling which, for example, introduces the notion that certain things can be done by the German government only if it is really...

QUEST: But...

MONTI: -- a last resort. So, but in general, I -- I mean I take your point on which I very much agree. Europe has given enormously positive proofs over the years, excerpt that it normally takes a crisis to have Europe act -- put itself together. Europe should -- should become able to act boldly even without an open crisis.

(END VIDEO TAPE)

QUEST: Mario Monti talking sense about Europe and the inevitable crises that only ever bring a change.

This was the euro bosses with the bank index alone, up some 14 percent. The FTSE and the Central DAX, the Paris CAC, go on. But I want you to look at this one. Spain's Ibex 35. It gained a whopping 14 percent on Monday. And the banks were the biggest contributors. Santomdere (ph), for instance, itself was up just -- was up 23 percent. That's a sizeable improvement.

Ivan Watson joins me now from Madrid.

We know, of course, the reasons why the -- Spain would have been so -- so ebullient. It was the -- it was the country that could have, perhaps, been next in the firing line. But tonight, Ivan, is there a feeling in Madrid that the crisis is over for them?

IVAN WATSON, CNN CORRESPONDENT: Well, I think there's a feeling, Richard, that they dodged a bullet here, that there were real concerns last week. I was hearing it in the streets of Madrid and in other Spanish towns among ordinary people, fears that that Greek contagion could wash up here and spread to Spain, as well, which has already been suffering from economic recession for more than a year-and-a-half.

But as you see, these record gains today a sign of confidence in the Spanish markets. And not just here, across the border in Portugal, as well, record gains for one day of trading on the main Portuguese index.

The economists that I've been talking to on the ground here, they're saying that the government must take a step further -- must go further to build off of this new confidence and cut government spending.

Richard, let's take a listen to what one of these economists had to say to me.

(BEGIN VIDEO CLIP)

IGNACIO CANTOS, ATLAS CAPITAL ANALYST: I think the problem is markets are not believing the -- t Spanish government at its point. Then you need new missiles in employment. You need new missiles in cutting the -- the expenditure of some ministers, economies or local corporations to be sustainable for the markets.

(END VIDEO TAPE)

WATSON: Now, here's the challenge, Richard, how do you cut government spending when Spain, for example, has been facing this economic recession, when it has seen unemployment rise to the highest levels in the European Union, 20 percent, with the youth particularly being hit hard, people between the ages of 18 and 30 facing 40 percent unemployment?

How do you cut costs when so many millions of Spaniards are relying on government welfare to help stay afloat -- Richard?

QUEST: And that is a question that we'll talk to you about in the days ahead, as you continue the coverage from Spain.

Ivan Watson joining me from Madrid tonight.

I'll be back with more in just a moment as we continue this comprehensive coverage of the day that government decided it was time to save the euro.

(COMMERCIAL BREAK)

QUEST: I need to update you with the New York market, which has had such a strong session today -- 350, up nearly 3.3 percent. 11000 is some - - still some way off, but that gives an idea of -- of how things are trading in New York. It is off its highs of the day by some points. It was over 400 points at one point. Lots of points, as you can tell.

Now, to make another point, the German chancellor, Angela Merkel, says her cabinet will give its approval to the trillion dollar euro rescue package. Her support for the earlier bailout loan to Greece seems to have cost her dearly at her domestic polls.

CNN's Phil Black is in Berlin -- and -- and Phil joins me now.

Look, she -- she knew it was a risk with the failure vote, but honestly, Phil, how damaged is she as a result of what took place?

PHIL BLACK, CNN CORRESPONDENT: Well, significantly, Richard. It's really triggered yesterday's vote in the country's most populous state, North Rhine-Westphalia. The result there is being described as a political and personal defeat for the chancellor, Angela Merkel.

She's really been trapped between two opposing criticisms on this issue -- those who don't like the idea of bailing out Greece at all and those who accept that it -- they don't like it, but they accept it reluctantly and they believe that the chancellor has dithered on this, that she's hesitated, that she hasn't taken strong, decisive action soon enough.

And the result there is that the parties who make up the ruling coalition nationally here in Berlin have suffered a significant defeat.

And what this means is that the chancellor has lost her majority in this country's upper house. It means that governing from here on gets much more difficult. Every piece of legislation and particularly the big tricky ones, will now have to be negotiated with smaller parties -- Richard.

QUEST: All right. Many thanks.

Phil Black joining us from Berlin.

Phil, you and I will talk about this a lot more in the day tomorrow, when we get (INAUDIBLE) with exactly the damage to Angela Merkel in her economy.

Many thanks, indeed.

Phil Black joining me.

One note to bring you. I happened late in the day. It's been such a busy day, we almost feel sort of rightfully putting it where it is.

The union representing the cabin crew at British Airways has turned the screw up in its battle with the airline. Unite says its members will stage more strikes -- lots of them, in fact.

Extraordinary.

Get ready for this -- a total of 20 days in May and early June. The strikes are being broken up over a series of dates and you need to be aware of them. The first stoppage is from May the 18th to the 22nd inclusive -- 18, 19, 20, 21, 22.

Then, it goes from May the 24th to the 28th, inclusive. And then again, from May the 30th to June the 3rd.

So you see very tight, with just a day or so off in between.

BA's management and the union continue to be in dispute over pay, staff numbers and working conditions. B.A. tonight said that it would continue full service at Gatwick, London City, and within five days of the strike, it would come out with a flying plan that it would implement from Heathrow. It said it would be putting thousands of passengers on other airlines and it would once again be going into the charter market and wet leasing planes to carry on as best they can.

I'll come back in just a moment, when there'll be a Profitable Moment.

(COMMERCIAL BREAK)

QUEST: Tonight's Profitable Moment.

Today, the European leaders and the IMF opened a spigot of cash -- $1 trillion U.S. has been lined up. It is an impressive amount, which had immediate positive effects. I wish you could say that that is the end of the problem, but I don't think that it is.

Firstly, there is the question of whether this money will be enough. For the moment, it will be -- but only for the moment.

There is the much more serious issue of making sure Eurozone countries put their financial houses in order. This is the really big problem, as Ken Rogoff told us tonight. After all, we wouldn't be in this mess in the first place if most of those countries in trouble had following the existing rules.

Mario Monti summed it up perfectly tonight. It's time for the European member countries to stop being polite to each other when they see things going wrong. After all, their economic well being and the continent's economic future depends on it.